Traveled distance,stock and fuel efficiency of private vehicles in Canada: price elasticities and rebound effect

This paper presents estimates of the rebound effect and other elasticities for the Canadian light-duty vehicle fleet using panel data at the provincial level from 1990 to 2004. We estimate a simultaneous three-equation model of aggregate demand for vehicle kilometers traveled, vehicle stock and fuel efficiency. Price and income elasticities obtained are broadly consistent with those reported in the literature. Among other results, an increase in the fuel price of 10% would reduce driving by ~2% in the long term and by 1% the average fuel consumption rate. Estimates of the short- and long-term rebound effects are ~8 and 20%, respectively. We also find that an increase in the gross domestic product per capita of 10% would cause an increase in driving distance of 2–3% and an increase of up to 4% in vehicle stock per adult. In terms of policy implications, our results suggest that: (1) the effectiveness of new fuel efficiency standards will be somewhat mitigated by the rebound effect and (2) fuel price increases have limited impacts on gasoline demand.

Philippe BarlaEmail:

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Philippe Barla   is full professor at the economics department of Université Laval. He is currently the director of the research center GREEN and is a member of CDAT. He is conducting theoretical and empirical research on energy efficiency in the transportation sector. Bernard Lamonde   obtained his MA in economics in 2007 working on this project. He is working as an economist for Agence de l’efficacité énergique du Québec. Luis Miranda-Moreno   is professor at McGill Department of Civil Engineering and Applied Mechanics. He was post-doctoral student at CDAT when this research was carried out. His research interests include road safety, travel behaviour and demand modeling. Nathalie Boucher   holds a PhD in economics from Queens’ University. She is the executive director the CDAT a research center dedicated to improving knowledge about energy use in the Canadian private and commercial transportation sector.